Boston Scientific lost $3.6b in '06 due to Guidant deal

Boston Scientific Corp., the state's largest life-science company, lost $3.6 billion last year thanks to its expensive acquisition of heart-device maker Guidant Corp. , and executives said yesterday they weren't certain when sales of its most important products would begin to recover from their slump.

The annual loss was the Natick company's first in five years. The bulk of it came from charges related to buying Guidant for $27 billion, including a single special charge of more than $4 billion when the company wrote off the research it acquired in the deal. Without special charges, profit would have been about $1.4 billion last year -- still below the $1.6 billion it made in 2005, before it owned Guidant.

The news did not come as a surprise to Wall Street, since the company had disclosed preliminary sales in January. Shares dropped 12 cents, or less than 1 percent, to $18.33 yesterday.

After savoring a victory over archrival Johnson & Johnson in the bidding war for Guidant almost exactly a year ago, Boston Scientific has struggled on two fronts. The Food and Drug Administration hit the company with a warning letter that effectively blocks significant new products until regulators are satisfied with the company's quality control.

Meanwhile, doctors began backing away from its key product, drug-coated coronary stents, amid a series of studies that showed the stents could pose higher health risks than less expensive stents without drug coatings. The company had counted on significant profits from stents to pay off the debt from the Guidant acquisition.

Drug-coated-stent sales in the fourth quarter of 2006 dropped $100 million from the same quarter last year, from $606 million to $506 million. That helped drag down fourth-quarter profit from $334 million to $277 million, a decline of 17 percent.

In a conference call with investors yesterday, chief financial officer Lawrence Best said he believed the market had "bottomed out" for stents, and for implantable defibrillators made by Guidant.

"I don't think anybody in Wall Street is going to believe us," said Best, "but internally we actually think our best year on drug-eluting stents is ahead of us, not behind us."

Best predicted Boston Scientific sales would remain flat at about $2 billion in the next quarter, but declined to offer guidance beyond that, saying the future of the heart-device market is "just too hard to predict."

Stephen Heuser can be reached at sheuser@globe.com.